Introduction to Airline Industry

Introduction to Airline Industry (As per New CBCS Syllabus for 1st Semester, BBA – Aviation Management, Bengaluru Central University w.e.f. 2019-20) Dr. Sumeet Suseelan MBA, DAHTM, DBA, Doctorate in Aviation Management Former Cabin Crew Air Asia / Air India CMD, International Institute of Aviation ISO 9001:2015 CERTIFIED <ul style="display: flex;"><li style="flex:1">©</li><li style="flex:1">Author </li></ul>No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording and/or otherwise without the prior written permission of the author and the publisher. First Edition : 2019 <ul style="display: flex;"><li style="flex:1">Published by </li><li style="flex:1">:</li><li style="flex:1">Mrs. Meena Pandey for Himalaya Publishing House Pvt. Ltd., </li></ul>“Ramdoot”, Dr. Bhalerao Marg, Girgaon, Mumbai - 400 004. Phone: 022-23860170, 23863863; Fax: 022-23877178 E-mail: <a href="mailto:[email protected]" target="_blank">[email protected]</a><a href="mailto:[email protected]" target="_blank">n</a>; Website: <a href="/goto?url=http://www.himpub.com" target="_blank">www.himpub.com </a>Branch Offices New Delhi ::“Pooja Apartments”, 4-B, Murari Lal Street, Ansari Road, Darya Ganj, New Delhi - 110 002. Phone: 011-23270392, 23278631; Fax: 011-23256286 <ul style="display: flex;"><li style="flex:1">Nagpur </li><li style="flex:1">:</li></ul>::::Kundanlal Chandak Industrial Estate, Ghat Road, Nagpur - 440 018. Phone: 0712-2721215, 3296733; Telefax: 0712-2721216 Bengaluru Hyderabad Chennai Pune Plot No. 91-33, 2nd Main Road, Seshadripuram, Behind Nataraja Theatre, Bengaluru - 560 020. Phone: 080-41138821; Mobile: 09379847017, 09379847005 No. 3-4-184, Lingampally, Besides Raghavendra Swamy Matham, Kachiguda, Hyderabad - 500 027. Phone: 040-27560041, 27550139 New No. 48/2, Old No. 28/2, Ground Floor, Sarangapani Street, T. Nagar, Chennai - 600 017. Mobile: 09380460419 “Laksha” Apartment, First Floor, No. 527, Mehunpura, Shaniwarpeth (Near Prabhat Theatre), Pune - 411 030. Phone: 020-24496323, 24496333; Mobile: 09370579333 Lucknow Ahmedabad Ernakulam Cuttack :::::House No. 731, Shekhupura Colony, Near B.D. Convent School, Aliganj, Lucknow - 226 022. Phone: 0522-4012353; Mobile: 09307501549 114, “SHAIL”, 1st Floor, Opp. Madhu Sudan House, C.G. Road, Navrang Pura, Ahmedabad - 380 009. Phone: 079-26560126; Mobile: 09377088847 39/176 (New No. 60/251), 1st Floor, Karikkamuri Road, Ernakulam, Kochi - 682 011. Phone: 0484-2378012, 2378016; Mobile: 09387122121 New LIC Colony, Behind Kamala Mandap, Badambadi, Cuttack - 753 012, Odisha. Mobile: 09338746007 Kolkata 108/4, Beliaghata Main Road, Near ID Hospital, Opp. SBI Bank, Kolkata - 700 010. Phone: 033-32449649; Mobile: 07439040301 <ul style="display: flex;"><li style="flex:1">DTP by </li><li style="flex:1">:</li></ul>:Rakhi / Pravin Printed at M/s. Sri Sai Art Printer, Hyderabad. On behalf of HPH. PREFACE The main idea of this book is to deliver high-standard quality material, which is the latest information in aviation industry. As a response to global trends and challenges in this industry, this course has been precisely portrayed to get intensive knowledge on the aviation management. This book introduces the students on latest trends and updated information in the industry, eventually to produce highly qualified professionals in the field of modern aviation management, who would easily interpret the laws and challenges of competitive and global aviation industry, and be able to contribute thoroughly to development of aviation industry. After this course, the graduates will be able to: ● Focus on the multi-disciplinary skills ● Identify the problems and trends ● Make managerial decisions independently ● Form groups required for their implementation ● Organise the necessary activities The information discussed in this book has a blend of theory with interactive sessions. Author SYLLABUS Objectives: Understanding about the airline industry and its regulatory bodies, Understanding the characteristics of Airline Industry, Understanding the organisational structure of the airline industry, Understanding the security, navigation and traffic control, and Understanding the importance of safety and security. <ul style="display: flex;"><li style="flex:1">UNIT 1: INTRODUCTION TO AIRLINE INDUSTRY </li><li style="flex:1">10 Hrs </li></ul>10 Hrs 16 Hrs Scope – Types – Scheduled and Non-scheduled Flights – Air Cargo Transport – Economic and Social Impact – Regulatory Bodies – Key Performance Indicators. UNIT 2: CHARACTERISTICS OF AIRLINE PROFITABILITY Main Industry – Characteristics of Passenger Airlines – Service Industry – Characteristics. UNIT 3: ORGANISATIONAL STRUCTURE OF AIRLINE ALLIANCES Development of Commercial Airlines – Deregulation – Impact of Deregulated Airline Industry – Organisational Structure – Types of Airline Personnel – Flight Crew and Cabin Crew – Training – Organisational Culture. <ul style="display: flex;"><li style="flex:1">UNIT 4: AIRPORTS AND ITS SERVICES </li><li style="flex:1">10 Hrs </li></ul>10 Hrs Personnel – Processing Passengers and Freight – Airport Security – Air Navigation Services – Air Traffic Control – Airplane Manufacturers – Types of Aircraft. UNIT 5: AIR SAFETY AND SECURITY Role of Regulatory Agencies – Airside Safety – Culture of Safety – Issues in Air Safety – Accident and Incident Investigation – Future of Airline Industry. CONTENTS <ul style="display: flex;"><li style="flex:1">1. Introduction to Airline Industry </li><li style="flex:1">1 - 35 </li></ul><ul style="display: flex;"><li style="flex:1">36 - 42 </li><li style="flex:1">2. Characteristics of Airline Profitability </li></ul>3. Organisational Structure of Airline Alliances 4. Airports and its Services 43 - 89 90 - 115 <ul style="display: flex;"><li style="flex:1">116 - 131 </li><li style="flex:1">5. Air Safety and Security </li></ul>Unit 1 INTRODUCTION TO AIRLINE INDUSTRY A century after the first commercial flight, the aviation industry continues to offer a variety of exciting and rewarding career options for qualified professionals. “Aviation” is a growing industry with very practical purposes. Worldwide, airlines carry more than 3 billion passengers a year and deliver about one-third of traded goods by value. Aviation sector employment also is seen as strong. Airlines employ about 2.5 million workers and expect “to accelerate the pace of hiring over the next year”. Overall, about 9 million people are employed in the global aviation sector. In the United States alone, there are almost 20,000 airports. Whether you are interested in working for a major airline carrier, an international airport, a government agency or a general aviation service provider, an associate’s or bachelor’s degree in aviation management can provide the foundational and specialised knowledge needed to succeed in a range of careers. As we all know that airline industry has seen much development after the post World War II period. With the progress in aviation techniques, airlines have paved a way for making travel and tourism better in every way. Hence, it plays a major role in the travel and tourism. The airline industry exists in an intensely competitive market. Observing a growth of 17.62% over the past year and with the recent development, there has been a significant increase in the airline opportunities. Both domestic and international airlines require trained professional on the airports for different kinds of jobs including ground staff, flight attendants, ticketing counters as well as air hostesses. Thus, looking at the wider scope of the airline industry, it is very much beneficial for the travel industry. 1.1 SCOPE OF AVIATION India at a Glance India is the seventh-largest country by area and the second-most populous with a population of over 1.35 billion. India is one of the fastest growing economies of the world and is likely to become the fifth-largest in 2019. (1) <ul style="display: flex;"><li style="flex:1">Introduction to Airline Industry </li><li style="flex:1">2</li></ul>The history of the Indian subcontinent dates back 5000 years to the Indus Valley Civilisation which gives it its name. It is a melting pot of all major religions of the world – Hinduism, Islam, Sikhism, Christianity, Buddhism, Jainism, Judaism and Zoroastrianism. It has a rich biodiversity with Himalayas in the north, the Thar Desert in north-west, Bay of Bengal to its east and Arabian Sea to its west; with various rivers and forests across the country. A nuclear weapon state, India, shares its land border with two other nations with nuclear capability – China and Pakistan – and countries like Nepal, Bhutan, Bangladesh and Myanmar. It has the third-largest standing army in the world and the fifth-largest defence budget. It has a robust space programme with the capability to launch its own satellites. Its leading industries include IT, pharmaceuticals, automotive and telecom. India is parliamentary democracy with an independent judiciary and free media. It has 29 states and 7 union territories with a huge diversity in terms of language, cuisine and culture. Indian Aviation Industry The Indian aviation market is on high growth path. Despite global headwinds on crude oil and currency, domestic passenger traffic in the period January-November 2018 grew by 19.2% year on year. Total passenger traffic to, from and within India, during April-November 2018 grew by around 15% year on year. As per IATA, the number of global departures during calendar year 2018 is projected at around 4.3 billion, a growth of 6% over the previous year. In contrast, in December2018, India completed 52 consecutive months of double digit growth. Yet, many feel, India is just scratching the surface. This stupendous growth has catapulted India among the top seven aviation markets with 187 million passengers (to, from and within India) in FY2017-18. India today handles the thirdlargest domestic traffic after USA and China. It is expected to become the third-largest market (domestic plus international) by 2022 and gradually reduce the gap with the top two nations over the next decade. The Growth Drivers The civil aviation industry is vulnerable to several intrinsic and extraneous risks. These include economic boom and bust cycles, volatility in oil price and exchange rates, natural disasters, epidemics, infrastructure challenges, protectionism, wars and political upheavals, etc. The Indian civil aviation industry has managed to exhibit significant resilience against these risks over the last two decades. Some of the key reasons behind the rapid growth of the Indian aviation sector include: (a) Steady growth in the Indian economy, which is now poised to become the fifth largest after US, China, Japan and Germany. (b) Domestic open skies which allows new airlines to freely enter the market subject to stipulated norms. <ul style="display: flex;"><li style="flex:1">Introduction to Airline Industry </li><li style="flex:1">3</li></ul>(c) Partial open skies in international routes wherein India’s neighbouring countries and those outside a 5000 km radius from the capital New Delhi can have unlimited flights to designated international airports in India. (d) Growth of highly competitive Low Cost Carriers (LCC) in India. (e) Development and operation of leading airports at Delhi, Mumbai, Hyderabad, Bengaluru, Hyderabad and Cochin through the Public Private Partnership (PPP). Many more are on the anvil. (f) Formulation of the industry-friendly National Civil Aviation Policy 2016 (NCAP 2016) that covers almost all aspects of Indian aviation. (g) Opening up of regional airports in India’s hinterland through the landmark Regional Connectivity Scheme (RCS) popularly known as UDAN (‘Ude Desh ka Aam Nagrik’). (h) Removal of FDI limits for almost all sub-sectors like airports, air cargo, ground handling, general aviation, Maintenance, Repair and Overhaul (MRO), etc. (i) Liberalisation of global Wing rights with all Indian carriers having a fleet of 20 aircraft free to fly abroad. (j) Clear intent of the government to leverage the strengths of the private sector by way of privatisation of the national carrier Air India, helicopter company Pawan Hans and operation of large government-owned airports through PPP. Government’s Step The Indian government is likewise taking steps for development of aviation industry. Recently, they have propelled a new plan named as UDAAN Yojana. This plan guarantees that traveling via air is reasonable for all, which will resultantly draw more travellers to different airlines. India – A Growing Aviation Market! Looking at the aviation sector in India, many developments are seen in recent times. According to the International Air Transport Association (IATA), India is the fastest growing aviation market currently. Bangalore is the aviation manufacturing hub in India, where most of the airlines are manufactured. Also, with the increased customer expectations, the airline industry has launched new airlines and services for the benefits of passengers. Vistara Airlines, which is a joint venture of Tata Sons and Singapore Airlines, is currently the best full-service airline in India. Also, it is the only airline offering a premium economy class for passengers wanting to travel with better services and amenities. Recent increase in Foreign Direct Investment (FDI) has also changed the face of aviation industry of India. The international aviation industry, on the other hand, is further developed with many more services and amenities. They generally provide services to virtually every corner of the world. Also, this is the major resultant factor in the increase of global economy on a large scale. Today, global airlines consist of more than 2000 airlines that are operating more than 23,000 aircraft. Thus, with the emerging trends in IT and developments in technology, there is much more scope for the airline industry in India to make its way to the top. <ul style="display: flex;"><li style="flex:1">Introduction to Airline Industry </li><li style="flex:1">4</li></ul>Opportunities in Airlines Considering the extent of the airline industry, there are a number of options for a career in the airline industry. Airlines are always in need of certified professionals for different kind of jobs on the airport. These jobs include ground staff, flight attendants as well as administration. Apart from the above mentioned, you can also find other options such as a job of pilot. Now, let us look at some of the types of pilot jobs:  Cargo Pilots: They fly every kind of cargo airlines such as UPS, FedEx, etc.  Airline Pilots: They fly all the domestic or international airlines.  Corporate Pilots: They fly the inglenook, high-end aeroplanes for the high class commuters.  Aerial Firefighter Pilots: It is combined with other options, which is based on contracts and requirements.  Military Pilots: They fly specialised aircrafts in order to transport equipment and to accomplish combat missions. Thus, there are endless opportunities in the airline industry. If you are planning to get into the industry, you must have completed the IATA certification courses which are provided at different institutes throughout India. Also, there are a number of institutes in India, offering different courses in travel and tourism which can help you to get into the travel industry. Government Initiative to Improve Air Connectivity within India and Overseas UDAN-RCS – UDAN (Ude Desh ka Aam Naagrik) <ul style="display: flex;"><li style="flex:1">is </li><li style="flex:1">a</li><li style="flex:1">regional airport development and “Regional </li></ul>Connectivity Scheme” (RCS) of Government of India, with the objective of “letting the common citizen of the country fly”, aimed at making air travel affordable and widespread, to boost inclusive national economic development, job growth and air transport infrastructure development of all regions and states of India. At the beginning of the scheme, out of total 486 airports, 406 were participating unserved airports, 27 were well served airports out of 97 non-RCS airports and 12 were operational airports out of 18 participating underserved regional operational airports (November 2016) with regular fixed-wing scheduled flights. UDAN scheme will add to this number by expediting the development and operationalisation of India’s potential target of nearly 425 unserved, underserved and mostly underdeveloped regional airports with regular scheduled flights. The scheme has two components. The first component is to develop new airports and enhance the existing regional airports to increase the number of operational airports for scheduled civilian flights from 70 (in May 2016, total 98 operational including army airports) to at least 150 airports (by December 2018) with regular scheduled flights. Initially, more than 100 underserved (no more than 7 scheduled flights per week) and unserved regional airports will be developed by December 2018, for which the initial funding of ` 45,000 million (equivalent to ` 47 billion, US$ 680 million or € 610 million in 2018) for the <ul style="display: flex;"><li style="flex:1">Introduction to Airline Industry </li><li style="flex:1">5</li></ul>enhancement of 50 regional airports was approved in May 2017. Out of the total 70 airports included in Round-I, 43 are regional airports to be newly operationalised. RCS-UDAN operations have commenced from 13 regional airports and additional 12 regional airports are ready to receive flights. 18 regional airports still require significant upgrade (November 2017). The second component is to add several hundred financially viable, capped airfare, new regional flight routes to connect more than 100 underserved and unserved airports in smaller towns with each other as well as with well served airports in bigger cities by using “Viability Gap Funding” (VGF) where needed. Initially, three separate rounds of bidding for the award of routes will be concluded by the end of 2018. Union Government share of “Viability Gap Funding” is from the cess applied to flights to popular routes to main cities and respective state governments have also offered additional benefits to the flight operators to make UDAN-RCS viable. UDAN-RCS Round-I concluded in April 2017, 5 airlines companies were awarded 128 fixed-wing flight routes to 70 airports (including 36 newly made operational airports, taking the number of total number of operational airports with civilian scheduled flights to 106 and total 131 airports operational with civilian and army operation including dual-use airports), several of which have already become operational by November 2017 and most of remaining routes will become operational by December 15, 2017. UDAN-RCS Round-II results will be awarded in late December 2017, from among the 141 proposals received for 502 new regional routes from 17 airlines and helicopter companies to operate flight services. Number of aircraft jumped 38% to 548 in December 2017 from 395 in 2014 and 50 aircraft are being added every year. Subsequent phases with inclusion of seaplanes will boost the number of potential landing sites from nearly 500 airports to over five lakh (500,000) water bodies as well as more locations along India’s 7,000 km coastline. SpiceJet has placed a US$ 400 million order for 100 of these 12-seater amphibian seaplanes (December 2017). UDAN-RCS is both enabler and beneficiary of other key Government of India schemes such as Bharatmala, Sagarmala, Dedicated Freight Corridors, Industrial Corridor, BharatNet, Digital India and Make in India, National e-Governance Plan, Startup India and Stand Up India. Air Deccan Officials from Left to Right (Dr. Sumeet Suseelan, Mr. Bupesh Joshi, Mr. Anantha, Mr. Shah and Mr. Hussain) <ul style="display: flex;"><li style="flex:1">Introduction to Airline Industry </li><li style="flex:1">6</li></ul>The UDAN Scheme The UDAN Scheme is a key component of the Prime Narendra Modi’s National Civil Aviation Policy (NCAP) which was released by the Ministry of Civil Aviation (India) on June 15, 2016. The scheme will be jointly funded by the central government and state governments. Several states have come on board by signing the “Memorandum of Understanding” with the Union Government for this scheme. UDAN-RCS will connect an unspecified number of new regional routes, by operationalising 100 regional airports by the end of 2018-2019 financial year, with a target of 13 lakh (1.3 million) annual passenger seats, requiring annual INR 200 crore Viability Gap Funding (VGF). The frequency of flights must be minimum 3 and maximum 7 per week from the same airport. India has 394 unserved and 16 underserved airports. Out of a total of these, 410 potentialtarget unserved and underserved regional airports, INR 4,500 crore has been approved in 2016-17 Union Budget to revive and further develop 50 airports in the smaller regional towns between 2017-20 15 airports during 2017-18, another 15 airports during 2018-19, and 20 more airports during 2019-20. A total of 75 airports were operationalised for the civilian flights in India since independence, government has newly operationalised additional 36 regional airports for the civilian flights including 3 civil enclave within army airports, with regularly scheduled flights, within the single financial year of 2016-17, with the target to complete cumulative total of 50 operational regional airports by the end of 2018-19, and eventually operationalise a cumulative total of 100 regional airports by December 2018.

Introduction to Airline Industry

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